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Einhorn's New Short, DMGT
Posted by: Coeus Capital (IP Logged)
Date: November 6, 2012 03:36PM



David Einhorn’s new bearish position on London-based Daily Mail and General Trust (DMGT:LN) was the biggest short taken by any hedge fund against UK company in light of new regulatory rulings.

The EU had recently instated a rule forcing investors and hedge funds to disclose net short positions, higher than 0.5% and 0.2% respectively, of any company’s issued shares. The new ruling came into effect Nov. 1.

It is interesting to note that Einhorn had a 4.4% short stake in DMGT, the UK’s second-largest selling daily newspaper. However, DMGT’s stock price surged 21% in 2012 alone.

Investment strengths:

- DMGT is the second largest paper in the UK, with average daily circulation of 1.8 million in September.

- Diversified businesses with portfolio of digital properties and online news distribution, including Euromoney, institutional investor and metal bulletin.

- DMGT generates steady cash flow from operations of more than GBP300 yearly.

- Should have benefited from Olympics in 2012, evidenced by recent share price run.

Investment risks:

- High PEG ratio at 2.28x and BVPS of -0.02

- Highly leveraged at gross gearing of 19.48x

- High composition of intangibles/assets of< 0.5x but less acquisitive over the years

- Longer secular downtrend with printed publications

- Weaker economy could lead to lower ad revenue

Note: This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer to buy or sell any securities.



Guru Discussed: David Einhorn: Current Portfolio, Stock Picks
Stocks Discussed: DMGT,
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